As a reminder to those who have not yet filed their 2018 tax returns, April 15, is the due date to either file a return (and pay the taxes owed) or file for an automatic six-month extension (and pay the an estimate of the taxes owed). Caution should be exercised when preparing the extension application, which is IRS Form 4868. Even though this form is described as “automatic,” the extension is automatically granted only if it includes a reasonable estimate of the 2018 tax liability and only if that anticipated liability is paid along with the extension voucher. It is not uncommon for taxpayers to enter zero as the estimated tax liability without figuring the actual estimated amount. These taxpayers risk the IRS classifying their forms as having been improperly completed, which in turn makes the extensions invalid. If you need an extension, please contact this office so that we can prepare a valid extension for you.
How to File an Extension
The extension must be filed in a timely manner; at this office, we can file your extension electronically before the due date. If you are mailing an extension, be advised that the envelope with the extension form must only be postmarked on or before the April 15 due date. However, there are inherent risks associated with dropping an extension form in a mailbox; for instance, the envelope might not be postmarked in a timely fashion. Thus, those who have estimated tax due should mail their extension forms using registered or certified mail so as not to risk late-filing penalties.
In addition, the April 15 deadline also applies to the following:
Balance-Due Payments for the 2018 Tax Year – Be aware that Form 4868 is an extension to file, NOT an extension to pay. The IRS will assess late-payment penalties (with interest) on any balance due, even when the extension has been granted. Taxpayers who anticipate having a balance due need to estimate this amount and include payment for that balance, either along with the extension request (as indicated above) or electronically (through the IRS website).
Contributions to a Roth or Traditional IRA for the 2018 Tax Year – April 15 is the last day for 2018 contributions to either a Roth or a traditional IRA. Form 4868 does not provide an extension for making IRA contributions.
Individual Estimated Tax Payments for the First Quarter of 2019 – Taxpayers – especially those who have filed for extension – should be aware that the first installment of estimated taxes for the 2019 tax year is due on April 15. Taxpayers who fail to prepay the minimum (“safe-harbor”) amount can be subject to a penalty for the underpayment of the estimated tax. This penalty is based on the interest on the underpayment, which is calculated using the short-term federal rate plus 3 percentage points. The penalty is computed on a quarter-by-quarter basis, so even people who have prepaid the correct overall amount for the year may be subject to the penalty if the amounts are not paid proportionally or in a timely way. Federal tax law does provide ways to avoid the underpayment penalty. For instance, if the underpayment is less than $1,000 (referred to as the de minimis amount), no penalty is assessed. In addition, there are two safe-harbor prepayments:
1. The first safe-harbor prepayment is based on the tax owed on the current year’s return. There is no penalty when the prepayments (including both withholding and estimated payments) equal or exceed 90% the owed amount.
2. The second safe-harbor prepayment is based on the total tax amount (not including credits for prepayments) on the return for the immediately preceding tax year. This is generally set at 100% of the prior year’s tax liability. However, taxpayers with adjusted gross income exceeding $150,000 (or $75,000 for married taxpayers filing separately) must pay 110% of the prior year’s tax liability.
Individual Refund Claims for the 2015 Tax Year – The regular three-year statute of limitations expires for the 2015 tax return on April 15 of this year. Thus, no refund will be granted for a 2015 return (original or amended) that is filed after April 15. Taxpayers could risk missing out on the refundable Earned Income Tax Credit, the refundable American Opportunity Tax Credit for college tuition, and the refundable child credit for the 2015 tax year if they do not file before the statute of limitations ends. Caution: The statute does not apply to balances due for unfiled 2015 returns.
If you need help with your tax return or a back tax problem, call our Boca Raton office at 561-826-9303 to schedule an appointment.